YES Bank enters home loan business

Mumbai: Yes bank has entered the burgeoning housing loan market, with a focus on the affordable housing segment.

The move by the private lender, which started operations 10 years ago, comes in the wake of the Reserve Bank of India’s decision to allow banks to raise long-term resources to finance affordable housing. The money raised via bonds will not attract the cash reserve ratio and statutory liquidity ratio norms. As a result, this will reduce the cost of funds for banks.

“Home loan is a strategic product for us. The product has reached our branches and we are in the process of rolling it out,” said Pralay Mondal, senior group president (retail and business banking). The average size for mortgage loans will be about Rs 35 lakh, he added.

According to a report by rating agency Icra, the home finance market in India stood at Rs 9-lakh crore at the end of March. Of this, banks finance 63 per cent.

Till now, the bank had been offering loans in collaboration with Dewan Housing Finance and Indiabulls Housing Finance.

“With the new infrastructure bonds, one can effectively work like a housing finance company. Even if you give the loan at the base rate, you still have a margin to play as 30 per cent of it will qualify for priority-sector lending. It is a strategic product for us and it makes immense sense to get into it right now,” explained Mondal. He, however, did not divulge the interest rate.

Till now, the bank had been offering loans in collaboration with Dewan Housing Finance and Indiabulls Housing Finance.

According to RBI norms, loans of up to Rs 50 lakh for a property valued up to Rs 65 lakh in six cities - Mumbai, New Delhi, Chennai, Kolkata, Bangalore and Hyderabad - and up to Rs 40 lakh in other centres, will now qualify for affordable housing.

This comes at a time when the bank is working at driving the share of the retail banking business. Currently, retail contributes to 43 per cent of the total business. Mondal believes it is likely that the retail mix can increase to 50 per cent in two years.